Margin and leverage are inherent and crucial concepts in futures trading, allowing participants to control large contract values with a relatively small amount of capital. Margin in futures refers to the good faith deposit required by the exchange and clearinghouse to open and maintain a futures position. It is not a down payment for the asset but rather collateral to cover potential losses. There are typically two types of margin: initial margin, required to open a new position, and maintenance margin, which is the minimum balance that must be maintained in the account. If the account equity falls below the maintenance margin, a margin call is issued, requiring the trader to deposit additional funds to bring the account back to the initial margin level. Leverage is the magnifying effect that margin provides. Because a small margin deposit controls a contract worth much more, futures trading offers significant leverage. For example, if a futures contract is worth $100,000 and the initial margin is $5,000, the leverage ratio is 20:1. While leverage can amplify profits from favorable price movements, it also exponentially magnifies losses, making robust risk management and position sizing essential for futures traders.